Jan. 30, 2024
Dear Securities and Exchange Commission, Thank you for the opportunity to comment on SR-OCC-2024-001 34-99393 entitled “Proposed Rule Change by The Options Clearing Corporation Concerning Its Process for Adjusting Certain Parameters in Its Proprietary System for Calculating Margin Requirements During Periods When the Products It Clears and the Markets It Serves Experience High Volatility”. I am writing to express significant concerns regarding the proposed rule change and its potential ramifications on market stability and transparency. It is imperative to address these concerns comprehensively to safeguard the integrity of our financial markets. The proposed rule change raises several red flags, particularly regarding its potential unintended consequences during volatile market conditions. Of particular concern is the possibility of shielding risky positions, exacerbating systemic risks. Additionally, the inherent conflict of interest within the role of the Financial Risk Management (FRM) Officer is troubling, as it could compromise the objectivity of risk assessment and management. The lack of transparency due to redacted materials accompanying the proposal further exacerbates these concerns. Risk management mechanisms such as margin calls play a pivotal role in maintaining market stability by mitigating excessive risk exposure. There is a genuine concern that the proposed rule change may undermine these mechanisms, leading to unchecked risk accumulation. It is imperative to ensure that any adjustments to parameters strike a delicate balance between risk management and broader market interests. I strongly recommend reassessing the loss allocation framework to prioritize Clearing Fund deposits over the OCC's pre-funded resources. Additionally, implementing an independent review mechanism can ensure impartial evaluation of control settings, enhancing the credibility of risk management practices. Enhanced transparency measures, such as providing non-confidential summaries of redacted materials, are essential to promote trust and understanding among market participants. Strengthening oversight mechanisms and incorporating public input in decision-making processes can further enhance accountability and effectiveness. Furthermore, adherence to industry-wide standards and best practices is crucial to fostering market stability and resilience. Collaboration with stakeholders to establish industry-wide standards and best practices is paramount. Public accessibility to stress testing results can demonstrate the effectiveness of risk management measures and promote confidence in the financial system. In conclusion, I reaffirm the importance of fostering a financial environment that prioritizes fairness and transparency. I trust in the SEC's ability to thoroughly consider the concerns raised during the rulemaking process and urge a thoughtful and comprehensive approach to addressing them. Thank you for your attention to these critical matters. Sincerely, Kristoffer Svendsen